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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (17922)	4/7/2002 12:46:21 AM
From: Don Lloyd	Read Replies (1) \| Respond to of 74559

DAK - Interesting M3 graph from N.Trust.... didn't someone say just last week it increased by hundreds of % in the 70's???? CB?? Maybe I'm wrong. To increase 100% in 10 years only requires an annual growth rate of about 7.2%. This looks like it was more than satisfied. Regards, Don

To: LLCF who wrote (17922)	4/7/2002 12:58:33 AM
From: Raymond Duray	Read Replies (2) \| Respond to of 74559

LLCF, Re: Interesting M3 graph from N.Trust.... didn't someone say just last week it increased by hundreds of % in the 70's???? Two forces were at work in the 1970's to push M3 to astronomical growth rates. First, Arthur Burns was using the money supply to boost his pal Nixon's political prospects, damaging the economy for the sake of electoral goals. The other bit of folly was that the solons of the FRB decided, peculiarly, that it was their obligation to target a Fed funds rate no matter what the impact on money supply. According to one text on the matter: The 1970s experienced rapid inflation due in part to the oil embargoes. During this period the Fed overstimulated the economy by trying to maintain a target fed funds rate. Recall that the Fisher effect states that nominal rates will rise due to expected inflation. The Fed continually increased the money supply to offset the pressure high expected inflation was exerting on interest rates. However, inflation is caused by excess demand (too much money available relative to the goods and services produced). By keeping interest rates low the Fed actually fueled excess demand for borrowing. Source: www2.uta.edu While looking for an answer to your query, I recalled the discussion of this phenomenon in Greider's "The Secrets of the Temple". There's a very good discussion of the matter there. Additionally, a webcrawl turned up a couple of interesting and one useful link: econ.yale.edu The other is a compilation of economist jokes. Clearly an acquired taste: etla.fi Though I did find one apropos to a discussion of the FRB policy of the 1970's: Q: How has French revolution affected world economic growth? A: Too early to say. Tout alors!